We Americans Are a Pessimistic Lot

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Americans are generally pessimistic about the economy. Perhaps that feature is our strength, and is what makes us work harder than the rest of the world to get ahead.

The Gallup Company has been polling Americans for years, and periodically including a poll question about whether respondents think that the economy is getting better, or getting worse. This week’s chart shows the difference between those two choices, dating back to 1997. For most of that period, the stock market has been rising, and the US economy has been growing. And for most of that time, poll respondents have been generally pessimistic about economic growth. That seems like an interesting paradox.

Early in this study period, Gallup sampled respondents rather infrequently, so the data were spotty. Beginning in 2008, as the economy was more obviously headed into a problematic patch, Gallup began sampling for this question daily, and publishing data on a rolling 3-day basis. For most of the time since then, poll respondents have been overly weighted to the “getting worse” side.

In early 2015, that tendency swung back to the positive side, with respondents more likely to say that the economy was getting better. Evidently this was a boring development for the folks at Gallup, who decided to demote this question to only monthly reporting status as of May 2015. Perhaps that demotion is itself an indication of something.

Why are Americans so pessimistic in the reporting of their views about the economy? This is a fascinating question, and it perhaps goes back to our collective history as immigrants. For a person to leave his home, and to set off across either the ocean or the prairie in search of a better condition, that person has to have a belief that his current condition is a bad one. At the same time, he also has to have a belief that there is something better, somewhere out there in the ether, and that it can be realized through action. It seems to be a persistent condition that Americans generally are simultaneously pessimistic about their current situation, and optimistic about some hypothetical future place or condition that they can get to. We are collectively bred from an ancestral stock of people who were perhaps inherently dissatisfied, but nevertheless hopeful about what might lie over the next hill, or after the next election.

When these Gallup Poll data get to a positive or negative extreme, then that can be a sign like other sentiment indicators of a climax condition for the stock market and for the economy. The latest number is -18, which is right about in the middle of the two-decade range, and thus not showing us a skewed condition to take advantage of. Later this year, as the presidential election campaign has dragged on and as we have all heard from the candidates about how terrible things are, it would be reasonable to expect a more pessimistic reading worth of a major bottom. The eurodollar COT leading indication says we should expect to see such a sentiment condition arrive around October 2016.